Importance of Management Accounting System and Reports

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK1.............................................................................................................................................1
P1. Importance of various management accounting system..................................................1
P2. Importance of management accounting report and its type.............................................3
M1 Evaluation of Benefits of various management accounting systems..............................4
D1 Integration of management accounting system and its reports in organisational process.1
TASK2.............................................................................................................................................1
P3. Appropriate techniques of cost analysis..........................................................................1
M2 A range of management accounting techniques..............................................................4
D2 Interpret data for a range of business activities................................................................4
TASK3.............................................................................................................................................4
P4 Advantages and disadvantages of planning tools used in budgetary control....................4
M3 Use of planning tool to prepare budget............................................................................6
TASK4.............................................................................................................................................7
P5 Financial problem and techniques to solve these problem................................................7
D3 Planning tools for solving financial issues.......................................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Management accounting is the practices of collecting useful information related to
business activity and recording of that data in accounting report that help manager to make
effective decision (Management accounting, 2018). Management of companies collect,
reminder, measure, control and examine the collected information that aid them to make policies
and strategies to succeed goal. It is a system which is followed by the management to resolve
various financial issues that may arise with the organisation. To realize the value of direction
accounting Airdri is chosen, it is hand dryer manufacture founded in 1974 and one of the small
enterprises of UK.
In this project report detailed information about management accounting their system and
importance of report is shown. Project focus on different costing method, various planning tool
which are useful in maintaining budgets and important of management accounting approaches to
resolve different financial problem faces by companies.
TASK1
P1. Importance of various management accounting system.
Accounting is a method of recording, maintaining, auditing and analysing important
financial information to the management and advise them on taxation matter. It is useful in
revealing the profit and loss for an accounting year and provides the values and nature of
organisation owner equity, assets and liabilities. Accounting is further divided in two categories
that are financial accounting and management accounting.
Management accounting is defines as the process of identifying, analysing, recording,
and presenting useful financial information which is used by internal manager for making
decision, improving performance, planning for future and controlling operation with an
organisation. This helps them to forecast various future events with the help of past experiences
and develop short and long term effective policies (Amidu, Effah and Abor, 2011).
Financial accounting refers to the tracking of firm's money transaction using centralised
standard to measure the economic performance for an accounting year. It is summarising and
presenting of transaction in financial report or financial statements such as cash flow or income
statements and balance sheet. In Airdri manager used three important accounting system to
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evaluate and analyse information like cost, performance and inventory. These are explained
below:
Cost accounting system: This system is help small and large company to examine and
improve its real profitability by estimating actual cost of its product. Cost accounting system
helps manager to measure the total cost that is incurred during the production of a particular
product. Airdri produces expensive hand dryer thus it require huge cost in the production so this
system is useful in this company. They use to record all the production related operation and help
them to get exact information cost which is involved in production process. There are mainly
three type of costing system. Actual costing is used to track and record direct costs that are
involved in producing a product (Carlsson-Wall, Kraus and Lind, 2015). For example in Airdri
manager uses to measure the cost of total hour utilised in manufacturing a product. Standard
costing is the analyses of difference between actual and budgeted cost like manager of Airdri
prepare a budgets of cost that is going to be involved in production process and then they
compare it with actual cost involved. Normal costing is used to derive the cost of a product. For
example in Airdri manager uses normal costing to derive the cost of hand dryer.
Inventory management system: This system is used by production organisation to
ascertain the actual information of stock lying with them. Manager track the inventory while it is
in transit, storehouse or in production process. Inventory lies within organisation in three basic
form which is raw material, goods in progress and finished good. In Airdri manager uses this
system to record the total inventory present in there production departments. They also manage
and record the total flow of raw material and finished hand dryer with this system. There are
various techniques of inventory management system to maintain effective report of their stock
such as perpetual and periodic inventory, FIFO, LIFO and JIT. Management of Airdri use FIFO
techniques in which earlier received stock will be used first for production of product (Dražić
Lutilsky and Dragija, 2012).
Job costing system: This system is mainly associated with evaluating and analysing cost
of individual job that is involved in different operation performed within the company. For
example in Airdri manager uses this system to analyse direct and indirect cost that is involved in
the production of hand dryer. So they can further reduce the cost if required and improve the
efficiency of business to increase the profitability of Airdri.
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